Indian grain-based ethanol production disrupted as government halts rice supply

MUMBAI (ICIS)–India’s rice-based ethanol production was disrupted as the government suddenly stopped supply of the feedstock in late July.

Grain-based ethanol producers are hoping the government will soon resume selling surplus rice from its stocks at the Food Corporation of India (FCI) at subsidized rates.

India has around 100 grain-based distilleries that fully rely on feedstock supply from the government. Their production accounts for more than a fifth of total ethanol being procured by oil manufacturers for fuel blending.

Currently, distilleries producing ethanol from rice as well as dual-feed distilleries, which use sugarcane and grains have been affected by the sudden disruption, said a source at the All India Distillers’ Association (AIDA) an apex body representing domestic producers.

“We are facing a huge crisis and some producers may be forced to stop ethanol production. We are in talks with the government,” he added.

No official explanation was given but the stoppage of rice supply to ethanol producers came after India banned exports of the grain.

On 20 July, India banned the export of non-basmati white rice in a bid to contain rising domestic prices.

The south Asian nation is the world’s largest rice exporter, accounting for nearly 40% of the global trade of the grain.

The government is reviewing its policy of supplying surplus rice from FCI for ethanol production and may impose some restrictions, according to media reports.

“FCI has stopped the supply of surplus rice from its depots for the production of ethanol, due to which supply at our 500 kilolitres/day grain-based ethanol plant at Chhindwara, Madhya Pradesh will be disrupted for few days,” Gulshan Polyols, one of the largest manufacturers of rice-based ethanol said in a regulatory disclosure to the Bombay Stock Exchange (BSE) on 25 July.

Distilleries are currently trying to limit the disruption in production by considering alternatives.

Gulshan Polyols has started procuring damaged food grains/rice from the open market to fulfil its commitments, it said in its statement.

This could increase costs for rice-based ethanol producers as they procure rice from FCI at Rs20/kg ($0.24/kg), much lower than current market price of around Rs31/kg.

Globus Spirits, another grain-based ethanol producer, said that it plans to use alternative raw materials such as broken rice and maize for producing ethanol.

“During this changeover process, we expect 7-10 days of disruptions at our West Bengal and Jharkhand facilities. In this period, the alternative raw material supplies are expected to begin,” as per a statement from Globus on 25 July.

BCL Industries said that it was awaiting a policy from the FCI regarding the resumption of rice supplies.

“The company is also able to produce ethanol in Bathinda (Punjab state) from FCI rice that it had bought prior to the suspension but expects a temporary disruption in the production of ethanol,” BCL said.

To achieve India’s target of 20% ethanol blending in auto fuel, the country will need to produce around 10.16bn litres of ethanol by 2025.

Companies producing ethanol from sugarcane feedstock will need to produce around 6bn litres, while the remaining 4.16bn litres, will come from grain-based sources, based on government estimates.

In the ESY ended October 2022, India’s ethanol production stood at 4.08bn, achieving a blending rate of 10.0%.

India’s ethanol supply year (ESY) starts November. In the current ESY to early July 2023, around 3.51bn litres of ethanol were supplied to oil manufacturers, with the fuel blending rate nationwide estimated at 11.7%.

Nearly 2.85bn litres of ethanol of the total came from companies using sugarcane feedstock, while the remaining 660m litres was supplied by grain-based producers, official data showed.

Focus article by Priya Jestin

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